Peter Guidi's Blog

Waking the giant, retailers and merchant issued ACH decoupled debit cards.

In alternative payment, credit card, debit card, interchange, payment on October 29, 2009 at 4:32 pm

Theodore Bikel, who made his film debut in The African Queen, once said “All too often arrogance accompanies strength”. I suppose, he may have been speaking of Humphrey Bogart, but today, couldn’t we apply this to the constant drumbeat announcing the death of ACH Decoupled Debit from the nation’s Financial Institutions and analysts’?

Capital One’s shuttering of its decoupled debit card has raised the eyebrows of industry experts with ISO & Agent declaring; “Decoupled debit cards appear to be fading away”. Meanwhile, Javelin Strategy and Research declares; “Merchant-centric decoupled debit suffers disconnect between the merchants’ interests and their costumers”.

The Mercator Group may have it closer to true when they say “Decoupled debit is all about loyalty.”, and there lies the real disconnect. It’s not between the merchant and consumers interest, it’s between the merchant and financial institutes interest. When it comes to the consumer, we all agree that providing the best value is paramount, but who is best able to provide the consumer with the best value, the retailer at the point of purchase, or the financial institute through a method of payment? In the end, it all boils down to costs, rewards and the giant’s desire to wake. One has to wonder, if the high cost of interchange and financial institutes’ monopolistic practices have created enough discomfort to break the slumber? (

  1. Decoupled Debit will always exist and will never go away. Think of it as the paper check. The paper check is declining, but will never completely disappear as some may want you to believe. The Decoupled Debit has had some failed trials in some markets, but has also been proven a great success in others. If Decoupled Debit is processed on a “closed-loop” network the value is indeed between the merchant and the consumer. It’s the “open-network” Decoupled Network cards that are failing due to the cost of the transaction. The lower the cost of transaction, the greater the savings.

    Let’s use the example of a specific industry. How about petroleum? Now that merchants are getting fed up with the costs of interchange climbing, I have noticed many gas stations offering a discounted price for cash verses credit. So is cash the only alternative option? I think not. Do you think the merchant wants to fill their safes up with cash and have the increased risk of being robbed? Doubt it. Decoupled Debit is prime for this industry. Most consumers get gas from the same station because it is convenient and cheap. Add cheaper to convenience and the consumer will use it. It’s kind of like “If you build it they will come”. Convenience is always going to be #1.

    Now with that being said, the merchant and consumer in this scenario both win. The merchant saves a small fortune on Interchange Fees and the consumer saves a couple cents per gallon of gas that they were going to pay for out of their checking account anyway.

    • If Closed Loop ACH Decoupled Debit can meet success what is the weakness in the Open Loop systems that has caused the failure?

      Also, I’d be interested in hearing more on this subject from your associates. Please forward the blog to those who may have input on this issue. Thanks, Peter

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